How to get out of your overdraft and get £175 from a new bank
FOR many people living in an overdraft is a way of life - but the costs can easily add up.
It's easy to bury your head in the sand and keep paying the interest - but if you're £1,000 into an overdraft then over 10 years you could end up paying £9,600 extra to your bank.
By April 1 next year, banks must charge a single interest rate for arranged overdrafts and axe unarranged overdraft fees, following a crackdown by the Financial Conduct Authority (FCA).
At the moment, banks often charge between £2 to £30 a month for an arranged overdraft, while unarranged fees can be much higher - up to £6 a day or £80 a month.
An unarranged overdraft - sometimes called an unauthorised overdraft - is where you spend beyond the agreed amount you're allowed to borrow set by your bank.
But even if the fees are being reduced, there are loads of ways to reduce your debt costs before then.
If you cut your spending by £100 each month, you'd get rid of a £1,000 overdraft in 10 months.
But for many that isn't possible. Next look at ways to increase the amount of cash coming in.
Shift your debt to a money transfer credit card or loan
If you're still struggling to get out of debt, you can consider getting a money transfer credit card or loan to help you pay it off.
Andrew Hagger of Moneycomms and Rachel Springall of Moneyfacts both said a money transfer card is the cheapest way to get out of your overdraft.
But you’ll need to pay in £1,750 per month so consider whether you’ll be able to meet this criteria before switching.
If you can’t afford it, HSBC’s Bank Account offers £75 to switch and has a lower £500 monthly pay-in.
NatWest: You can also get a lower £150 .
The latter comes with a monthly £2 fee, but you'll get 2 per cent cashback on bills paid by direct debit.
To get it, you'll need to pay in at least £1,500 per month.
Lloyds Bank: Another option is to switch to , which will give you a £125 bonus.
On top of the bonus, the account gives a choice of three annual benefits, including six free cinema tickets, a free magazine subscription or a Gourmet Society membership.
This offer is available to customers who open the account before November 12.
First Direct: It gives new switchers a bonus of £50 .
You’ll also get a £250 zero per cent overdraft, and can open a linked 2.75 per cent regular saver.
M&S Bank Current Account: New switchers receive a £100 M&S gift card, with no minimum pay-in, plus reward points when you shop in M&S.
You also get a £100 zero per cent overdraft and if you stay for 12 months, you'll get another £80 gift card after a year.
Talk to your bank to tackle debt
If you are in genuine financial hardship, it might be time to have a chat with your bank.
While it might not change the amount you owe, they can refund or temporarily stop charges using their discretion.
Make sure you give them the relevant information about your financial circumstances to enable them to consider your situation fully.
If you're not happy with your bank or building society's response to an official complaint, see if the Financial Ombudsman can help.
Alternatively, you might want to consider contacting a debt charity.
Ms Springall said: "It’s important not to suffer in silence, so those who are struggling with debt would be wise to seek out a debt advice charity for support."